Accounting II Chapter 7 Review

Plant assets are sometimes referred to as fixed assets.

• True
• False

A company purchases a building and land for $400,000. The building is appraised for $300,000 and the land for $150,000. The cost assigned to the land should be $150,000.

• True
• False

International financial reporting standards require that significant components of a plant asset be recorded individually in different plant asset accounts.

• True
• False

An accounting form on which a business records information about each plant asset is called a plant asset record.

• True
• False

The value of an asset determined by tax authorities for the purpose of calculating taxes is
called the millage rate.

• True
• False

Salvage value is also referred to as residual value, scrap value, or trade-in value.

• True
• False

Because of land’s permanent nature, it is not subject to depreciation.

• True
• False

Original cost, estimated useful life, and miles driven in a year are the three factors considered
when calculating annual depreciation expense.

• True
• False

The formula for calculating a plant asset’s annual straight-line depreciation expense is: Original cost minus estimated salvage value divided by years of estimated useful life equals annual depreciation expense.

• True
• False

Whatever method a business selects to calculate depreciation expense for a portion of a year, that method should be used consistently from year to year.

• True
• False